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Kubayi investigates R80m nuclear contract irregularity

In a convoluted story of miscommunication and ignored warnings, senior officials in the energy ministry are being investigated

10 August 2017 - 16:06
Jan-Jan Joubert and Linda ensore

Mmamoloko Kubayi. Picture: BUSINESS DAY

Energy Minister Mmamoloko Kubayi has launched an investigation into several senior officials in her department for alleged nuclear tender irregularities amounting to R80m.

Kubayi’s office has confirmed that it is probing the possible violation of Treasury regulations when awarding an R80m contract to a nuclear transactional adviser‚ Mahlaka-A-Phalala.

According to documents seen by Business Day‚ energy director-general Thabane Zulu‚ his deputy Zizamele Mbambo‚ procurement specialist Ndaba Ngwane and chief financial officer Yvonne Chetty signed a deviation request to sign off the deal.

Zulu has since been moved to head the Strategic Energy Fund, while Ndaba quietly left the department. Mbambo remained in his position despite awarding the contract.

The scandal started at the end of August 2016 when one of the consulting firms in the nuclear-build programme‚ Mahlaka-A-Phalala, compiled a report finding that the department was not ready to issue a request for proposal for its intended nuclear new-build programme‚ estimated to be worth R1-trillion.

Mbambo and Ngwane requested that Chetty and Zulu approve a deviation from normal procurement processes‚ in practice allowing Mahlaka-A-Phalala to continue work on the development of a transactional adviser.

Chetty and Zulu agreed‚ with Chetty warning that it was subject to agreement by the Treasury and the office of the attorney-general.

However‚ Mbambo and Ngwane told Mahlaka-A-Phalala to continue with a second phase of the contract‚ the cost of which would grow by R80m to R100m by March, despite the required governance processes allegedly not having been followed.

Tina Joemat-Pettersson, who was energy minister at the time, suspended all payments related to the transactional adviser to Mahlaka-A-Phalala until the department had submitted a verification report to her on all deliverables received.

According to sources close to the events‚ this decision was never communicated to Mahlaka-A-Phalala as a service provider. Instead‚ Mbambo‚ Zulu and Ngwane continued to engage the firm and received work deliverables towards the procurement process without a contract and without all regulations being followed.

Among the serious allegations, yet to be responded to by the energy department, was that Mahlaka-A-Phalala was not subjected to a competitive bidding process. Instead‚ section 16 (a) 6.6 of the Public Finance Management Act was used, despite warnings by the relevant tender committee that this was wrong to keep paying Mahlaka-A-Phalala. This was also done despite legislation only allowing for the cost of the project to be extended 15% without an open tender process.

The suspension caused concern in energy circles because of the potential delay that it might cause to the finalisation of the Integrated Energy Plan and Integrated Resource Plan

Mahlaka-A-Phalala revealed to Joemat-Pettersson that it had a copy of the deviation request approved by Chetty and Zulu as given to it by Mbambo and Ndaba‚ despite the strict rules regarding leaking of internal documents.

The matter came to a head when the departmental tender committee met and had sight of Mahlaka-A-Phalala’s bills. The department shifted funds from the sundries account and paid the firm R56m of the R80m by the end of the financial year.

Zulu said only the department could comment. Numerous efforts to contact Mbambo for comment failed last week‚ and Ngwane could not be tracked down. Meanwhile, no reasons were given by the department for the suspension earlier in August of its deputy director-general for policy, planning and clean energy, Ompi Aphane.

But it is understood this was prompted by the allegations made by a whistleblower.

While disciplinary charges may be laid against him, Business Day understands that the allegations are not so serious as to result in criminal charges.

Aphane was not available for comment on Thursday.

Unconfirmed rumours within the department suggest the noncompliance issues relate to Aphane’s failure to deliver on time to the minister’s requests.

Kubayi has said the allegations relate to a number of “compliance” issues, which Aphane had not responded to within the three days that he was given.

The suspension caused concern in energy circles because of the potential delay that it might cause to the finalisation of the Integrated Energy Plan and Integrated Resource Plan, which will lay the basis for energy planning for the next 20 years.

Draft documents were published for public comment and the department is busy processing them with a view to producing final documents, which will crucially indicate the role of nuclear energy in the country’s future energy mix.

Aphane was central to this process but someone working closely with him has been put in charge as acting deputy director-general.

The department is confident that his suspension will not delay the process.

While Kubayi has committed herself to finalising the Integrated Energy Plan and Integrated Resource Plan by the end of February, to align with the budget process, insiders said the volume of work was so extensive that there was no way the deadline would be met.